By Sajjad Shaukat
Last year, the BJP-led Indian
government of Prime Minister Narendra Modi announced economic reforms, claiming
that the country’s economy was in a strong position. Encouraging public
investments in infrastructure, strengthening the banking systems and catalyzing
private investments were key highlights of the policy. The government said that
General Sales Tax (GST) had been the biggest reform along with steps like
demonetisation and fight against black money. In this regard, under the caption
“Modi’s reforms have robbed India of its economic prowess,” Rahul Gandhi wrote
in the Financial Times on November 8, 2018, “One year ago, Prime Minister
Narendra Modi bypassed the Reserve Bank of India, locked his cabinet in a room
and gave the country just four hours notice before announcing his arbitrary and
unilateral demonetisation scheme. Overnight 86 per cent of the value of India’s
currency was withdrawn from circulation. The prime minister claimed his decision
was aimed at wiping out corruption. Twelve months on the only thing he has
wiped out is confidence in our once booming economy. Demonetisation has wiped
out 2 per cent of India’s gross domestic product, destroyed the informal labour
sector and has wiped out many small and medium businesses. It has ruined the
lives of millions of hard-working Indians. The Centre for Monitoring Indian
Economy has calculated that over 1.5m people lost their jobs in the first four
months of 2017 due to demonetisation.” On the other side, India’s Punjab
National Bank Scam exposed the myth of Modi’s reforms. In this respect, India’s
second-largest state-run bank said on February 14, this year that it had
detected fraud of almost $1.8 billion at one of its branches, sending its
shares plunging more than seven per cent.
The bank pointed out, “Based on
these transactions other banks appear to have advanced money to these customers
abroad…the fraud had been reported to enforcement agencies for further
investigation.” German renowned TV channel Bloomberg reported that the value of
the illegal transactions amounted to eight times the bank’s net income last
year. Undoubtedly, Punjab National Bank scam has been described by the foreign
media, indicating, India as a heaven for robbers and looters of National
exchequer and piling the same as black money abroad, raising the question, does
FATF need more evidences to put India in watch list. However, “1.8 Billion US
Dollars Punjab National Bank fraud case” is being touted as the biggest-ever
fraud in the banking sector in India. Punjab National Bank is second largest
among India’s public sector banks.
As regards the culprits, Nirav Modi
Company owned by Nirav Modi and Gitanjali group of companies owned by Mehul
Choksi-maternal uncle of Nirav Modi have been identified for fraudulently
robbing the bank. Reportedly, a Deputy Manager of PNB namely Gokulnath Shetty,
posted at PNB’s foreign exchange department in Mumbai since March 31, 2010, is
also identified as conduit/facilitator. Mr. Shetty and another PNB official
Manoj Kharat fraudulently issued Letter of Undertakings (LoUs) to these firms
without following prescribed procedure or making entries in the banking system,
avoiding detection of transactions. While PNB did not name the other lenders,
Union Bank of India, Allahabad Bank and Axis Bank, who are said to have offered
credit based on LoUs issued by PNB. Reportedly, the PNB fraud case has
intensified allegation and counter allegations—a cold war between the BJP and
the Congress for supporting the fraudulent companies. Interestingly, Mr. Nirav
Modi was present and was part of Indian contingent at annual gathering of World
Economic Forum 2018 in Davos, Switzerland.
In this connection, Reuters
reported, “A $2 billion fraud at India’s second-biggest state-run lender Punjab
National Bank has shaken the nation’s financial sector, triggering a massive
probe and regulatory changes…CBI arrests former PNB auditor M.K. Sharma, who
was responsible for auditing systems and practices of the bank’s Brady House
branch…gold and diamond bribes given to one PNB staffer named in fraud.” Nevertheless,
PNB fraud is not a new thing in India, as there are many businessmen absconding
abroad after siphoning huge loans from Indian banks in public and private
sectors.
In a recent report of the Indian
CBI, Indians had stashed more than 500 billion US Dollars foreign banks in
terms of black money. And, Panama Papers leaks (2016) had mentioned more than
500 Indians found involved in money laundering through off-shore companies.
According to the Reserve Bank of
India (RBI), just 12 companies are estimated to account for 25% of the gross
NPAs, and were identified for immediate bankruptcy proceedings, while there are
488 others which have been given six months time to restructure their debt or
be dragged to National Company Law Tribunal (NCLT). The Financial Action Task
Force (FATF) had removed India from regular follow-up process in 2013 due to
improved record of complying with organization’s recommendations. But, based on
above facts and ground realities, the case of New Delhi seems quite different.
The ease with which corporate firms have been misusing the credit facilities of
banks suggests that the alliances between the two are much deeper and shadowy
transactions of huge quantity of money, being piled up abroad as black money
are providing enough evidence for FATF to take India by horns. We can conclude
that India’s Punjab National Bank scam has exposed the myth of Modi’s reforms,
especially in elimination of corruption.
